In 2025, student loan borrowers are faced with more choices than ever. Among the most common comparisons students and parents make is between private loans offered by Citizens Bank and federal student loans backed by the U.S. government. While both options help finance higher education, they differ significantly in terms of interest rates, repayment flexibility, borrower protections, and eligibility criteria.
This guide will walk you through the key differences and help you determine which type of loan better fits your unique financial situation and educational goals.
Understanding the Basics
Federal Student Loans
Federal student loans are funded by the U.S. Department of Education. These loans typically come with fixed interest rates, income-driven repayment plans, deferment and forbearance options, and potential loan forgiveness programs.
There are three main types:
- Direct Subsidized Loans – For undergraduate students with financial need. Interest is paid by the government while you’re in school.
- Direct Unsubsidized Loans – Available to both undergraduate and graduate students, regardless of financial need.
- PLUS Loans – For graduate students or parents of undergraduates. These have higher interest rates and require a credit check.
Citizens Bank Student Loans
Citizens Bank is a private lender offering student loans with both fixed and variable interest rates. Unlike federal loans, these are based on creditworthiness and financial background. Citizens Bank also offers multi-year approval and refinancing options, making it an attractive choice for borrowers with strong credit.
Interest Rates & Fees
- Federal Loans: For the 2025-2026 academic year, the interest rates are expected to stay near historic lows for undergraduate loans (around 5.5% fixed) and slightly higher for graduate or PLUS loans. There are no prepayment penalties, but origination fees may apply.
- Citizens Bank Loans: Interest rates vary depending on your credit score and co-signer’s credit profile. As of 2025, fixed rates range from 4.24% to 10.99%, and variable rates from 2.99% to 10.49%. Citizens Bank does not charge origination fees and offers interest rate reductions for autopay or existing customers.
Bottom Line: If you have excellent credit or a creditworthy co-signer, Citizens Bank may offer lower rates than some federal options—especially PLUS loans. However, federal loans generally provide more consistent and accessible terms for average borrowers.
Repayment Options & Flexibility
- Federal Loans: You can choose from a range of repayment plans, including:
- Standard (10 years)
- Graduated
- Extended
- Income-Driven Repayment (IDR) plans like REPAYE and SAVE
There are also protections like deferment, forbearance, and Public Service Loan Forgiveness (PSLF).
- Citizens Bank: Offers limited repayment flexibility. You can choose interest-only payments, immediate full payments, or deferred payments while in school. However, there are no income-driven plans or forgiveness options.
Bottom Line: Federal loans provide unmatched repayment flexibility, especially if your income is variable or you pursue a public service career.
Eligibility & Application Process
- Federal Loans: Require completion of the FAFSA (Free Application for Federal Student Aid). Approval is not based on credit (except for PLUS loans).
- Citizens Bank: Requires a credit check, and most students need a co-signer to qualify. The application process is quick, and you can receive pre-approval in minutes.
Bottom Line: Federal loans are easier to qualify for and don’t require a credit history, making them ideal for most undergraduates.
Loan Limits
- Federal Loans: Annual and aggregate loan limits apply:
- Dependent undergrads: up to $31,000
- Independent undergrads: up to $57,500
- Graduate students: up to $138,500
- Citizens Bank: Higher borrowing limits—up to 100% of the school-certified cost of attendance. This is helpful for students attending expensive private colleges or medical/law school.
Bottom Line: If federal loans don’t cover your total education cost, Citizens Bank can be a good supplemental option.
Loan Forgiveness & Assistance Programs
- Federal Loans: Eligible for PSLF, Teacher Loan Forgiveness, and various IDR forgiveness programs after 20-25 years of repayment.
- Citizens Bank: No forgiveness options, though refinancing and consolidation are available.
Bottom Line: Federal loans are far superior when it comes to potential forgiveness or repayment assistance.
Final Verdict: Which Is Better for You?
| Criteria | Federal Student Loans | Citizens Bank Loans |
|---|---|---|
| Interest Rates | Fixed, moderate | Variable or fixed, based on credit |
| Credit Requirement | Not required (except PLUS) | Credit check required |
| Repayment Flexibility | High (IDR, forgiveness, deferment) | Limited |
| Borrowing Limits | Capped | Up to full cost of attendance |
| Loan Forgiveness | Yes | No |
| Best For | Most undergraduate students, lower-income borrowers | Graduate students, borrowers with strong credit |
Recommendation:
- Choose Federal Student Loans if you are an undergraduate, have little to no credit, or need flexible repayment terms.
- Consider Citizens Bank if you’ve exhausted federal aid, need higher loan limits, or can qualify for low interest rates due to good credit or a co-signer.
Summary
Choosing between Citizens Bank and federal student loans depends largely on your personal financial situation, credit history, and repayment goals. Federal loans are generally safer, more flexible, and better for most students—especially those unsure of future income or career direction. However, for those who have solid credit and need to bridge funding gaps, Citizens Bank offers competitive rates and convenience.
By understanding the key differences and evaluating your own needs, you can make a more informed decision about how to fund your education in 2025 and beyond.
